Commentary, 11/12 2009

Published Dec 4, 2009
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11/12 2009


Without a doubt, the Norwegian Confederation of Trade Unions (Landsorganisasjonene – LO) is the largest and most influential workers’ organisation in Norway. So it was a highly symbolic gesture when Roar Flåthen, the President of LO, joined Terje Riis-Johansen, Norwegian Minister of Petroleum and Energy, at a press conference to announce the coming 21st licensing round on the Norwegian Continental Shelf.

This joint press conference served to emphasise the importance of oil jobs to Norway, as well as to demonstrate that those who represent the industry’s workers are concerned about the level of activity. In essence, to show that both the government and the unions have a commitment to keeping the oil industry at work.

Having a highly competent workforce available has long been a concern on the NCS, especially considering that as the shelf matures, so too do those who work in the industry. So to ensure that competence levels will not sink to dangerous lows, a common theme has been the aggressive recruitment of young engineers and technicians.

And this issue of retaining and expanding competence is also a consideration when it comes to the level of activity on the NCS. Flåthen is concerned that without steady activity, the industry will lose valuable personnel, making it difficult to respond as the economy heals and demand for oil and gas increases.

During the press conference, Flåthen emphasised that the Minister and authorities must work to ensure a steady, balanced level of activity – particularly when it comes to Statoil, with the state as the majority owner.

Thus far, as a prelude to the 21st round, the ministry has called for oil companies to nominate blocks that they feel should be included in the offering. An invitation that has been extended to all pre-qualified companies and licensees on the NCS.

The Minister, in his official announcement of the nomination phase of the upcoming round states, “With the 21st licensing round I seek to give the oil industry access to attractive areas which are less explored,” and “The nominated areas will hopefully contribute to long-term value creation in the petroleum industry.”

Even though the Minister’s statement continues, “I seek to give the oil industry access to attractive areas which are less explored. It is important to provide the industry access to frontier areas through predictable licensing rounds,” it is important to note that areas that are currently “off limits” – such as those around the Lofoton, Vesterålen and Senja – will not be eligible for nomination.

But the significance of the coming 21st licensing round will not lie in the areas that are off limits. What the next round will reveal the level of interest in the NCS. Recent licensing rounds – the 20th round awards and the Awards in Predefined Areas (APA) – were, for the most part, under way before the worst of the credit crunch hit the NCS. Although we’ve seen signs that the economy has begun to show improvement, this 21st round still falls under the shadow of a recession.

And this coming round may reveal more about the way the NCS will mature. Oil production is now lower, but gas production is, and has been, on the rise. The International Energy Agency, in its recommendations to develop a future energy mix, calls for the use of gas – a low-emissions energy source – as a bridge towards a diverse range of energy sources.

The authorities have made their intentions abundantly clear when it comes to a commitment to support renewable energy sources for the future. Yet – as many, including the IEA, confirm – oil and gas will be and important part of the energy mix for the foreseeable future. So far, the 21st licensing round seems be a renewed signal from the authorities of their support for the near-term as well.

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